What’s in a Name? – Recycler By Any Other Name is Just a Title

By Ed Stukane, PlanITROI

It sounds sacrilegious, or at least un-American, to say “don’t recycle your IT equipment.” After all, recycling is the right thing to do…isn’t it?

The challenge that has become evident in the asset disposition, or “disposal” category as it is often referred to the in the industry, is that IT asset managers are using the term “recycling” as a catch-all description to describe IT asset end-of-life services. In fact, just saying “asset end-of-life services” creates some confusion because many in the industry would not consider a retired PC to be an asset. In fact, it is more likely to be considered a liability and “e-waste” more often than not.

The nomenclature surrounding the industry language and labels in the IT asset disposition category are confusing. The result is that IT asset managers often paint ITAD services providers, including asset recovery specialists and recyclers, with the same brush. Therefore, expectations of the asset end-of-life process and the providers may be perceived as “they are all basically the same,” but in reality the service spectrum is quite broad. Where on that spectrum an IT asset manager will seek an ITAD services provider is often driven, or limited, by a manager’s perceptions of the available ITAD service provider options.

Looking at Provider Descriptions

A recycler that is a “pure-play” recycler generally thinks in terms of tonnage of e-scrap. Computers and electronics are viewed for the value of commodity materials obtained from the shredding process. These recyclers likely have large and loud machines that take the core materials that may have been disassembled and separated by types of metals, plastics and glass, and grinds those materials to small bits. These bits would be remarketed as base materials in new manufacturing processes.

The level of recycling services provided and the value of precious metals recovered, are primary determinants of the net fees an asset manager will likely pay. Logistics costs will enter into the calculations, as might some level of data security, depending on the equipment involved and considering any data sanitization an asset manager may have taken prior to the equipment being picked-up.

Some recyclers will offset costs to a client by remarketing stripped components from PCs and other devices. Those components, if functioning, have a higher monetary value if they can re reutilized in fairly new equipment. If a client’s equipment is very old, any recovered value will only be found in the commodities recouped.

On the other end of the spectrum is the IT asset value recovery specialist that is considered more of a full service ITAD services provider. There are hundreds, if not thousands, of more recyclers than there are ITAD services providers that are asset value recovery specialists. The explanation for this is simple. It is easier and less time consuming, though possibly more capital intensive, to destroy equipment and separate the scrap by type, than it is to refurbish and remarket that equipment.

Generating revenue through efficient asset refurbishment may take a little longer in a value recovery processing facility which involves trained technicians. However, there will almost always be a financial return to the client. The only time there is not a financial return is if the asset value recovery specialist’s fees for asset de-installation, logistics, data sanitization, and new OS licenses and reinstallation (among many services) are generally high, and/or they do not have an extensive network of retail buyers of the product on the back end.

Some will ask how a financial return to the IT department can even be generated in today’s world economy. Simply put, it is matter of supply and demand. Though Gartner has provided research that the planet reached one billion PCs were in the world market by 2008 and the second billion will likely be in the market by 2014, there is a demand for a well refurbished piece of equipment that is a few years old, backed by warranties, remarketed with a new operating system, and most importantly, sold for a reasonable price. That demand is projected to be consistent as not everyone can afford, or simply is willing to pay, for the latest and greatest technology when a laptop, desktop PC or tablet that is just a few years old will more than suit their needs and budget.

The asset value recovery models will also vary by specialist. Some providers will receive a laptop or desktop from a client, wipe the hard drive and resell the unit wholesale “as-is.” No new OS is installed and no enhancements that add value would have been made. There is no question there is a market, usually off-shore, for this level of remarketed equipment, but the financial return to the previous owner of that equipment will be very limited at best. For them a few hundred thousand dollars, or even more than a million dollars, is not significant. During this period when IT departments are being asked to do more with less, that attitude seems to be less prevalent.

IT asset managers that are seeking a larger financial return while maintaining data security and environmental compliancy, should learn how their IT assets will be remarketed for a value that will provide a larger financial return to them. Managers should audit any provider’s re-manufacturing facility, and ask to see how incoming assets are audited and tested, how the data sanitization process is implemented, how problem units may be cost efficiently repaired and ultimately how all assets will be remarketed. It is worthwhile for asset managers to ask for the references of the commercial buyers of that equipment, i.e., those who buy for the large e-tail and retail operations that prominently feature the better refurbished computers and electronics.

Comparing Recyclers with Asset Value Recovery Providers

In the same way that IT asset management as a category of business has developed a set of best practices, which can be reviewed through IAITAM, the value recovery process can be equally assessed.

One criterion to consider when reviewing asset value recovery specialists is certifications, specifically ISO 9001 when it comes to the re-manufacturing process that is the foundation for asset value recovery. No surprise, a better quality product on the back of that process will produce a greater recovery value. The ISO 9001 certification should be considered not just for provider’s asset handling process, but for its “Lean Quality Management System.” A Lean QMS is a strong indication that an asset services provider is highly efficient at re-manufacturing and has a documented, audited process available for asset managers to view. An client’s own audit would show all the quality control points that provide assurances a better end product is being produced and remarketed.

To be sure there are a number of ISO 9001 certified recyclers that are excellent in their service provision.

These recyclers will most likely also have the ISO 14001 environmental health and safety certification along with the R2 and/or e-Stewards certifications. Not to confuse matters any further, asset value recovery specialists should have the same ISO 14001 and R2 or e-Stewards certifications. A certified recycler is considered to be a good downstream partner for a certified IT asset value recovery specialist.

The bottom line is that any vendor analysis that an IT asset manager undertakes should set aside the industry label of “recycling.” It should begin with what the asset manager’s organization is seeking to accomplish through its retired asset end-of-life process. From there it should consider each provider’s business models.

If the manager’s needs are aligned with a provider’s model, be it asset value recovery and revenue generation or recycling, then the asset manager has a good starting point for obtaining a vendor that fits expectations. If recycling is the chosen path and a financial return is not a motivator, then an asset manager should analyze and compare recyclers accordingly. If a maximum net return-on-investment is the objective, then seek to learn how revenue is generated, compare the value recovery specialists’ back-end processes and check for proven track records.